The Standards Operating Model

Our “Being the Best” standards focus on market share, people and the operating and financial metrics that drive long-term performance. To date, the Standards Operating Model has driven significant changes in our organization, leadership and operating practices.

Most importantly, the Standards Operating Model allows us to determine the sustainable revenue growth and earning power of our portfolio of funeral home and cemetery businesses.

Our Standards are designed to drive longer-term performance by growing market share and creating new heritage and producing consistent, modest revenue growth and a sustainable, increasing level of earnings and cash flow.

Our Standards are not designed to produce maximum short-term earnings because Carriage does not believe such performance is sustainable without ultimately stressing the business, which often leads to declining market share, revenues and earnings.

The Standards Operating Model eliminated the use of financial budgets (budget control model) which freed up enormous amounts of time to work on growing each local business and improving the quality and skills of the staff. Standards Achievement is the measure by which we judge the success of each business.

Standards Council:

The Standards Operating Model was originally developed by a group of former owner partners and top managers (the Standards Council). The Standards Council studied and evaluated the key drivers of development of success at Carriage’s best business over a five-year period. Their work led to the development of Standards Operating Model and the related incentives compensation plan.

At the end of each year the Standards Council members for each of our three Regions meet, review and approve the Standards Achievement and related incentive compensation awards for each business.

Incentives Align With Standards:

Each Managing Partner participates in a variable annual Being the Best bonus plan whereby they earn a percentage of their business’ calendar year earnings based upon the actual standards achieved for that year and has the opportunity to share in the earnings of the business as long as the performance exceeds our minimum standard of 50% of the Total Standards Achievement for that calendar year.

Each Managing Partner also participates in a long-term (5 year) Good to Great variable bonus plan whereby they earn a bonus payment equaling the average Being the Best annual incentive bonus over five years times a multiple of twice the compounded annual growth rate of the Net Revenue when they have achieved revenue growth by a minimum of 2% over 5 years.

The 4E Leadership Model

The Standards Operating Model requires strong leadership to grow an entrepreneurial, high-value, personal service and sales business at sustainable Field EBITDA Margins.

Our 4E Leadership Model is based upon principles established by Jack Welch during his tenure as CEO at General Electric, and is based upon 4E qualities essential to succeed in a high performance culture: Energy to get the job done; the ability to Energize others; the Edge necessary to make difficult decisions; and the ability to Execute and produce results.

To achieve a high level of Standards in a business year after year, we must have “A Players” in charge who have the 4E leadership skills to grow the business by hiring, training and developing highly motivated and productive teams that produce results.

Strategic Acquisition Model

We believe a primary driver of higher revenue and profits in the future will be the execution of our Strategic Acquisition Model using strategic ranking criteria to assess acquisition and divestiture candidates. As we execute this strategy over the next ten years, we will affiliate with many of the best remaining independents in demographically attractive, strategic markets.

We are disciplined in qualifying acquisition candidates since we are looking for high performance partners over time. We believe we can execute our acquisition strategy without proportionate incremental investment in our consolidation platform infrastructure or additional fixed regional and corporate overhead.

Consequently, the sustained earning power of our portfolio as defined by our Consolidated EBITDA Margin should incrementally increase over time as we execute the Strategic Acquisition Model.